Update No. 289 – 15/02/17

There’s an old IT joke I quite like, read through and then I’ll relate it back to investing afterwards:

“Technical support; may I help you?”

“Yes, well, I’m having trouble with my computer.”

“What sort of trouble?”

“Well, I was just typing along, and all of a sudden the words went away.”

“Went away?”

“They disappeared.”

“Hmm. So what does your screen look like now?”



“It’s blank; it won’t accept anything when I type.”

“Are you still in the document you were using?”

“How do I tell?”

“Can you move the cursor around on the screen?”

“There isn’t any cursor: I told you, it won’t accept anything I type.”

“Does your monitor have a power indicator?”

“What’s a monitor?”

“It’s the thing with the screen on it that looks like a TV. Does it have a little light that tells you when it’s on?”

“I don’t know.”

“Well, then look on the back of the monitor and find where the power cord goes into it. Can you see that?”

…..”Yes, I think so.”

“Great! Follow the cord to the plug, and tell me if it’s plugged into the wall.”

…..”Yes, it is.”

“When you were behind the monitor, did you notice that there were two cables plugged into the back of it, not just one?”


“Well, there are. I need you to look back there again and find the other cable.”

…..”Okay, here it is.”

“Follow it for me, and tell me if it’s plugged securely into the back of your computer.”

“I can’t reach it.”

“Uh huh. Well, can you see if it is?”


“Even if you maybe put your knee on something and lean way over?”

“Oh, it’s not because I don’t have the right angle-it’s because it’s dark.”


“Yes-the office light is off, and the only light I have is coming in from the window.”

“Well, turn on the office light then.”

“I can’t.”

“No? Why not?”

“Because there’s a power outage.”

“A power… A power outage? Aha! Okay, we’ve got it licked now. Do you still have the boxes and manuals and packing stuff your computer came in?”

“Well, yes. I keep them in the closet.”

“Good! Go get them and unplug your system and pack it up just like it was when you got it. Then take it back to the store you bought it from.”

“Really! Is it that bad?”

“Yes, I’m afraid it is.”

“Well, all right then, I suppose. What do I tell them?”

“Tell them you’re too stupid to own a computer.”

I told this joke to an American acquaintance of mine in late 2008. It was just after he told me he was going to 100% cash because Barack Obama was elected. His reasoning was that having an unqualified socialist community organiser in charge of the US economy was virtually certain to end in disaster. I told him that to replace a computer with a brokerage account and the blackout with the election of a new president in my joke and he would pretty quickly figure out my view on the matter.

People sometimes say I’m hopelessly tactless. Direct to the point of abrasiveness. But that story shows just how careful I can (sometimes) be when I’m telling someone they’re being very stupid. The fellow nonetheless followed through on his commitment to for most part, missing one of the 3 or 4 best bull-markets he’s ever likely to see in his lifetime. He was very fortunate that the majority of his wealth was tied up in a business and for some reason, it didn’t occur to him to sell that due to the new president… People seem to view private business as somehow detached from the economy, yet not listed businesses.

I recount the story because I used the same one recently in an attempt to point out to a different acquaintance how ridiculous their contemplation of a complete withdrawal from public markets was, the driver was apparently that an unqualified fascist dictator has seized control of the US economy (and it is virtually certain to end in disaster…).

The market is much more fairly valued today than it was 8 years ago; it may even be that markets are lower in four years than they are now. But if you’re considering selling your shares because someone from an ideological viewpoint that differs from yours is now in power, unfortunately, you’re too stupid to operate your own brokerage account. You should go to cash and you deserve the mediocre results that will ensue.

We have trimmed two positions and eliminated one in the first half of February. We were raising funds in the hope of deploying them into a capital raising. We bid large, but only managed to get about a 3% position for the fund, but given our sense of a heavily distorted risk/return situation, we are likely to buy on market in coming weeks as dividends (and hopefully new subscription capital) floods in. We think it is one of those 3 or four very good ideas that come along each year, where we can act in scale with a very high expected IRR for several years to come. It is the second such opportunity in only the last 3 months, so perhaps we’re due an idea dry spell.

The eliminated position was Medibank Private Limited (MPL). At elimination, it was only a shade over a 0.6% holding. The MPL position was a poorly executed one for the fund, we were scaled back roughly 11 to one in the IPO, then when it came off briefly to near IPO prices, we purchased with a teaspoon when we should have used a shovel (or at least a tablespoon) and saw its price run away again before we bought what we should have.

Finally, when the stock got above our assessed value in April/May/June of 2016, we didn’t eliminate the position as we should have, given it never got anywhere near a full position and at those prices, was unlikely to for a long time.

The upshot of the experience was a 25.1% IRR over the holding period. This is a few percentage points better than the portfolio did over the equivalent period. So the decision and execution though imperfect added value overall – Tony Hansen 15/02/2017


P.S. Unrelated, my Wife and I will be undertaking a 65km walk for charity on 25 February. Those who know me well will be aware that I’m generally reluctant to support organised charity, far too much waste for my taste as a generalisation.

With that said, the charity we are supporting with our 65km walk is Cystic Fibrosis NSW, in association with The Children’s Hospital at Westmead. While I am unfamiliar with the inner workings of these charities, I am sure they can do much good with any donation you might care to make.

In an out of character move (I consider every $1 I donate now as stealing at least $250 from future eleemosynary activities due to the power of compounding), over and above the $140 I paid to register my team, I have started things off with a $50 donation of my own. If I can get only $5 from everyone who reads this blog between now and the event, I’ll easily surpass the $700 target.

Donate here (donations are tax deductible!):


Or if you prefer to give to Sue’s effort:



Apr 1st 2011

Jun 30th 2016

Current Price

Since July 1st 2016

Since Inception


EGP Fund No. 1














*1 after a 31 May 2013 dividend of 2.333 cents per share (cps) plus 1.000 cps Franking Credit, a 31 May 2014 Dividend of 7.000 cps plus 3.000 cps Franking Credit and a 31 May 2015 Dividend of 8.6667 cps plus 3.7143 cps Franking Credit and a 31 May 2016 Dividend of 6.0000 cps plus a 2.5714 cps Franking Credit

*2 calculated based on dividends reinvested

*3 estimate as blog posted prior to publication of the final figure